Fundamentals of marketing management

Article Summary

Name: THAMADA UDAY

Roll No: 10145
Title: Dynamic pricing strategies for multiproduct revenue
management problems

By
(Constantinos Maglaras & Joern Meissner)

Summary
 This article illustrates how to reduce two problems making it a
common formulation, thus connecting prior results that have appeared in
the literature under unified framework, and explores some of the
consequences of this formulation. Here the two problems “dynamic
pricing” and “capacity control” are reduced to common formulation
which recovers well known structural results regarding the monotonicity
properties of the value function and the associated controls. The
aggregated formulation leads to closed form solutions to the fluid model
revenue maximization problems. Based on the fluid model, three
heuristics are proposed a static pricing heuristics, a static pricing
heuristic applied in conjunction with an appropriate capacity allocation
policy, and a “resolving” heuristic that reevaluates the fluid policy as a
function of the current state and time-to-go.
Here the firm controls the aggregate rate at which all products
jointly consume resource capacity. It highlights the common structure
and algorithmic simplifications through the reduction in the control
dimension of the associated optimization problems. So the preceding
analysis reduces the problems into appropriate single-product pricing,
highlighting their common structure and enabling a unified treatment.
The fluid model has deterministic and continuous dynamics, and is
obtained by replacing the discrete stochastic demand process by the rate,
which now evolves as a continuous process.